So you’re looking for new premises. Where do you start? What do you need to think about? What happens once you’ve signed the documents the agent gave you? What are your obligations?
We are often asked by clients to check or prepare their new leases and add specific things that are important to them or take out things they don’t like. The problem is it’s probably too late if they’ve already signed an agreement to lease – the lease is usually now a done deal.
This is because agreements to lease typically say that the parties will enter into a lease on a particular form (for example the Auckland District Law Society Inc lease or on the landlord’s lease) and will only be changed to be consistent with terms set out in the agreement.
So when the agent gives you the agreement to sign, don’t think “I’ll sign it now so I don’t miss out on the deal, and I’ll get my lawyer to add or delete bits later”. It will be too late.
We recently had a client sign an agreement to sublease. The deal was that the subtenant would pay all of the tenant’s costs under the lease (rent and outgoings). The problem was the agreement recorded some, but not all, of the outgoings that were listed in the lease. The parties signed the agreement without their lawyers looking at it. Then when the sublease was prepared, even though it was thought that all costs would be payable by the subtenant, the subtenant’s solicitor insisted on some of the outgoings being excluded. This meant our client was required to continue to pay some of the costs even though it wasn’t the deal they thought they had done.
The lesson here is that once the agreement is signed, it’s often too late. So how do you avoid this situation?
Be prepared – be clear in your head about what terms you are looking for, and if there is anything particular to your circumstances that needs to be included, or anything in the standard conditions that shouldn’t apply for your premises. It could be that the standard terms are sufficient and you don’t need anything special. But it’s best to be comfortable that is the case before you sign.
Think about your operations, your short, medium and long-term plans, what if things change or don’t go as planned, and if you have any special requirements.
Is certainty important for your business? What about flexibility? What obligations do you want at the end of your lease? Are you worried about earthquakes?
If you want certainty, maybe set rent reviews would help – percentage increases or adjustments in line with CPI, with market rent reviews to bring the rent back in line with the market. If you want flexibility, maybe instead of a long term a shorter initial term with the right to renew the lease is a good idea.
If you need to do works to the premises so that they are suitable for your use, what happens at the end of the lease? Do you have to put the premises back to how they were before you did the works or do you want just to be able to leave the premises as is? If you’re worried about earthquakes, do the standard lease terms adequately cover this?
What you want and what you can get will depend on what is available in the market and your negotiating strength, but it’s good to have a clear idea at the start.
Also, get a lawyer to review any documents before you sign them. If it’s a straightforward matter, we can provide a quick and cost-effective review to ensure that all essential matters are covered. The reality is you’ll have to pay for the lease or other formal documentation anyway so you should get the initial agreement reviewed to make sure it’s right.
Morrison Kent’s property lawyers act for both landlords and tenants and are leading experts in Commercial property leasing. We are happy to chat to you about your potential new premises. Give us a call before you sign the agreement the agent gives you, so you can be satisfied the deal as recorded is what you’ve agreed to and minimise your costs down the track.
If you would like further information or advice on these matters, please contact our Wellington property lawyers, Jamie Nunns on firstname.lastname@example.org or 04 495 8912, or Erica Tromp on email@example.com or 04 495 8904